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Text on screen: TITLE – Two key objectives of the ESG Income Strategy, BULLETS - Invest in issuers with strong ESG credentials, Seek to deliver consistent income
Esteban Burbano: So let me start by highlighting the two key objectives of the ESG Income strategy. Number one is to invest in issuers with strong ESG credentials. Number two is to deliver consistent income. Now, how do we achieve these goals?
Text on screen: Esteban Burbano, Fixed Income Strategist
By building a portfolio that is global. And a strategy that is flexible, in order to manage not only the ESG risks, but also the typical risk associated with a bond portfolio, such as interest rate risk, credit risk, or FX risk.
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The objective is not to mimic the income strategy with an ESG filter. This is an ESG focused strategy first. Now, that said, there’s also the common goals of delivering consistent income, as well as the approach, the global, flexible, benchmark agnostic approach, it is something that these two strategies share.
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However, because at PIMCO we have a centralized investment process, where we come together as a firm to analyze macro risks, and assess valuations across interest rate markets and credit markets, we could expect to see similar themes represented in both portfolios. So, with respect to, for example, interest rate duration in the portfolio, or overall level of credit risks, both portfolios should be somewhat aligned.
Text on screen: The ESG Income Strategy investment example: Mortgages
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Within our ESG income strategy, we are having a focus on things like mortgages. Now, because of the ESG focus on this particular strategy, we’re going to be focusing on mortgage pools that have a strong social component. What does this mean?
Text on screen: TITLE – ESG Income Strategy will focus on mortgage pools with a strong social component, BULLETS - First time home buyers, Underserved communities
For example, mortgages to first time home buyers, or mortgages issued to underserved communities. This strategy can serve
Text on screen: TITLE – The ESG Income Strategy may offer:, BULLETS - Strong ESG component, Opportunity to seem to maximize current income
clients that are looking for that strong ESG component, as well as looking for an attractive yield or dividend.
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Recorded 7 July 2021
Please note that this video contains the opinions of the manager as of the date recorded, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.
PIMCO is committed to the integration of Environmental, Social and Governance ("ESG") factors into our broad research process and engaging with issuers on sustainability factors and our climate change investment analysis. At PIMCO, we define ESG integration as the consistent consideration of material ESG factors into our investment research process, which may include, but are not limited to, climate change risks, diversity, inclusion and social equality, regulatory risks, human capital management, and others. Further information is available in PIMCO’s Environmental, Social and Governance (ESG) Investment Policy Statement.
All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations.
Socially responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgment exercised, by PIMCO will reflect the beliefs or values of any one particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and PIMCO is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful. Past performance is not a guarantee or reliable indicator of future results.
Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Outlook and strategies are subject to change without notice.
This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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